Life is not a box of chocolates

Dear P – grateful for the input on Cadbury’s. My reasoning for being rather more optimistic is as follows: so far Kraft has won the propaganda war by talking down price expectations but it needs C; it has been stalking for a long time and will certainly offer more; all bidders of any stature have second or third shots in their locker; just to walk away would massively damage K’s reputation; what about the fees already incurred? With so much wealth around the world – and dozens of bright fee-earners – is K going to be unchallenged and allowed to buy C cheaply? Finally, I just cannot believe that C itself will do nothing. Nothing is certain but my hunch is that we have seen nothing yet! Ever, John.”

So went an e-mail that I sent on November 15 to an investor friend. He had queried my optimism on the bid outcome, telling me of some complicated options he had written on Cadbury shares – all beyond me! I purchased Cadbury shares in September and in October, at 779p and 790p, convinced I would make a small profit in due course. Kraft had been playing a canny game; talking of being “disciplined”, not bidding up against itself, with Warren Buffett being wheeled out to warn of the dangers of over-bidding in a takeover battle. All this caused nervousness in the Cadbury share price, which drifted to 760p.

I was amused at some press naivety – did they expect Irene Rosenfeld (Kraft’s CEO) to announce that she would pay anything it took to acquire C – cash no object? Similarly, commentators noted the absence of interest from other parties – but no serious rival would declare its interest when Kraft had not even made a formal bid yet. In my experience, it usually pays to “stay aboard” and await the endgame, but even a seasoned investor has to confess anxiety. All one can do is to monitor newspaper articles as events proceed.

In an interview earlier this week, Cadbury chairman Roger Carr, “a hard nut in the chair of Cadbury” left the clear impression that price was the key. “I’m paid to do a job and that job is to deliver the best value for shareholders,” he said.

However, as I write this article on November 28, the spin is slightly different. “Cadbury warms to Hershey tie-up”, says the front page headline of the FT, with Todd Stitzer, Cadbury chief executive, declaring Hershey would be a better cultural fit than Kraft.

So, we await further developments. The hedgies trade, fee-earners rub their hands, shareholders and employees watch and wait. Time for my hot chocolate to calm the nerves.

John Lee is an active private investor writing about his own investments. He may have a financial interest in any of the companies and trading strategies mentioned.